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Blog Four:

The Future of Health Infrastructure

Bryce Stickland is the Business Development Manager-Sales & Leasing for Cornerstone Healthcare Property Fund (CHP Fund™). CHP Fund’s mission is to “Create Thriving Communities” through its Integrated Health Hub model. The concept of the “integrated health hub” allows for patients to have most of their healthcare needs met under one roof. Bryce’s focus as the National BDM is to spearhead sales & leasing through building corporate partnerships, facilitating sales and leasing negotiations, and appointing and managing real estate agency partners. He also assists with site identification for new and existing assets that could be a target for procurement.

What are the current emerging trends in health infrastructure at present?

We know that the ageing Australian population is driving strong demand for healthcare services, especially for the 65+ age cohort, which are mainly concentrated outside capital cities [1]. This age group is more likely to suffer from chronic health problems which in turn necessitate more doctors’ and hospital visits [2,3].

The Australian Universal Healthcare System is under pressure and needs to innovate to maintain its high standard of care in the future. In 2019-2020, 17.6% of patients thought care could have been provided by their GP for their most recent visit to the emergency department [4]. The public health spend as a percentage of GDP is increasing [5,6] whilst the percentage of the population with private health insurance has been decreasing for the last 7 years [7].

New technologies such as anaesthesia advances, robotics, and medtech are helping to improve efficiency when it comes to in-hospital treatments and the length of stay required. Expansion of same day surgery facilities in and out of traditional private hospitals is an emerging trend. The future of genomic based preventive healthcare [10] and telehealth, combined with remote patient monitoring technology [12] will continue to change the way healthcare is delivered, ultimately working towards keeping patients out of hospital.

One predicted change in the delivery of health is a shift from in-hospital care to a combination of in-hospital care and out-of-hospital care [8]. This may provide an opportunity for the development of private infrastructure in the catchment areas where, historically, patients would travel into institutional centres for their care needs. We have observed some shifts locally which follow the example observed in the US market, where there has been an 82% rise of the Ambulatory Surgical Centres between 2000 and 2016, whilst hospitals declined by 5% for the same period [9].

A shift towards out-of-hospital care is driving investment in stand-alone private infrastructure. An example of infrastructure being developed to meet this need is CHP Fund™’s Health Hubs. We are likely to see more stand-alone integrated Health Hubs commissioned by CHP Fund™ and other Healthcare REIT’s which are designed to cater to the needs of communities looking for convenient access to healthcare and located near public health infrastructure, such as regional hospitals, and capital city Health Precincts.

In response to these shifting trends, our Integrated Health Hubs are designed to bridge the gap between inpatient care models and outpatient care facilities, where patients can get most of their needs met without needing to move the car.

At CHP Fund™ we have also noted that doctors are moving away from being generalists towards specialisation and sub-specialties (for example, breast surgeon, or hepatobiliary surgeon). This means that the co-location of sub-specialities and integration of complementary practices with primary care services in buildings are beneficial for the patient experience.

Have you seen a shift in the demand for high quality healthcare assets as a result of COVID-19?

COVID-19 has fuelled interest from investors looking to find opportunities which provide strong risk adjusted returns in challenging economic times. In 2020 we saw 12 month rental returns for retail and office space negatively impacted by changes in tenant demand and consumer behaviours due to COVID-19 pandemic restrictions [13,14].

With the most recent evidence of continued capital growth and income return during the COVID-19 pandemic, competition for tenanted Healthcare assets, at sharp capitalisation rates, has increased along with the subscription to Healthcare Property Funds[14].

What does the demand pipeline look like in the short-medium term?

In the short to medium term, we think reform of the public and private healthcare system, combined with specialisation and tailoring of healthcare for patients, will create future demand for community and regional healthcare centres. We are focussed on rapid expansion of the Health Hub assets with the intent of meeting patient and community needs.

How are developers ensuring their assets remain relevant for future use?

Buildings need to be designed with patient accessibility and the healthcare operator in mind. At CHPFund™, we aim to gain class 9a classifications for our Health Hubs. Medical assets are different to A-Grade Office buildings because plant and equipment needs to be reliable in case of services outages as operational disruptions could pose a risk to patients.

What strategies are businesses implementing to ensure project delivery during COVID-19 lockdown periods?

During the current development of our asset, the Nepean Health Hub, we faced potential delays due to construction shut downs during lockdown periods. To mitigate disruptions to delivery, we consulted with the NSW Government to ensure that key events such as the transformer installation and associated power shut downs to neighbouring properties could occur on time.

There was also disruption and backlog for trades services due to ‘time off the tools’ and hotspot travel restrictions. Rising costs of raw materials have also been a management challenge. Our key learning from this has been to allow for more flexibility, such as sourcing alternative labour and materials, as mitigation for possible disruption with future projects.

Has the design of health infrastructure or product offering changed as a result of COVID-19 and if so, how?

We have seen a shift towards telehealth to allow for patient consultations when in-person appointments are not possible. Government funding has also changed to reflect this; Medicare rebates have been made available to patients for GP consultations [12].

In terms of physical design, the internal layout is crucial. Developers or providers need to consider patient and staff flow throughout the practice, ensuring spaces can operate within physical distancing and hygiene guidelines. We have added multiple entrances, lifts, and amenities for hygiene such as handwashing basins and hand sanitiser dispensers.

Where are the current opportunities for investors at present?

With stock tightly held at present, demand is outweighing supply. There are opportunities to create something new, to innovate, and go through the entire acquisition and development process. Opportunities exist for investors to partner with either healthcare service providers or to explore privately listed or unlisted healthcare real estate investment trusts (REITs) which is where CHPFund™'s Integrated Health Hubs and Colliers’ Strategic Advisory team can provide solutions.

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